Metric of the Week: Active Users

January 24, 2018

As a SaaS company, knowing how many active users your platform has is one of the most important metrics to track. More usage by more users is a strong indication of a healthy SaaS app, and a benchmark to determine the health of your company’s customer base.

What is an active user?

In a broad sense, an active user is any user who interacts with your platform in some way during a specific time period that you can identify with an ID, email, or username.

Active users are typically broken down into three groups or time periods:

Daily active users (DAU)

Weekly active users (WAU)

Monthly active users (MAU)

Some consider active users as a vanity metric. And they are right if the only activity a user has to engage in to be considered active is log in to your software. That shows users are interacting with your software, but is that interaction a sign that they are getting value from your platform?

“To ensure you track active users that yield valuable information to decision-makers, each company needs to define what actions both make a customer valuable to a company and provide value to a customer. The answers will vary based on the company and the software.”

If your software were a social media platform like Facebook, a good active user might be someone who logs in and scrolls through her news feed and comments on or likes some posts, or posts a picture with a status update, or watches a video. This type of user is valuable to such a platform because they would likely see advertising while on the platform (a source of income) while also feeling like their time spent on the platform was worth it.

The ideal active user doesn’t always have to be a daily user. Different software will determine what level of usage makes up an ideal customer. For a social platform like Snapchat, daily users are probably ideal active users. For a platform that helps you plan out a shopping list for specific meals, daily users would be great, but weekly users would probably be seen as ideal.

Why should I track active users?

User engagement is the lifeblood of a SaaS company. A well-built active users metric measures user engagement and should indicate which users continue to get value from your software. This is important because users who continue to receive value from your software will continue to pay to use it.

Keep in mind that high user engagement doesn’t always equal success. If you have a freemium-based SaaS platform, driving free users to become paying customers is your end goal. So if you have high user engagement without users converting to paying customers, you could have a problem.

Knowing your number of active users alone is not enough. You need to identify and track important actions users take. This helps you know how your customers get value from your app, or how many freemium users convert to paid plans.

Low activity or inactive users who are not getting value from your platform are at-risk users and are a major churn risk. If several customers fit into that category, it will be hard for you to achieve or maintain profitability.

Knowing who your at-risk users are allows you to contact them in an effort to get them re-engaged. Maybe they like your software but can’t figure out how to navigate a specific feature which stops them from gaining full value from the product. By reaching out, you could help them solve the problem they’re experiencing so they can continue to receive value from the product and will stick around longer.

Reaching out to at-risk users also provides your product team with insights on how to reduce the friction or sticking points that inhibit users from receiving value. This helps product teams improve the user experience, which improves the overall value of your platform.

There are other reasons to track active users. Doing so can show you if there is a problem with your app. For example, if user numbers randomly plummet one day, there could be a problem with your software or servers.

If user numbers drop after an update, there could be a few bugs making it difficult to use the platform that need to be worked out ASAP.

Learn from your active users

Once you’ve identified who your best active users are in different categories, study them. Look for any similarities they share. You want to understand users’ context for why they use your platform. You want to know demographics, actions, context, and similarities about the tasks that your platform helps fulfill. What types of actions do they take? How frequently do they use your app? Figure out what separates them from those who aren’t using your app as frequently and churn out quickly so you can design your software to help all users get more value from it.

Knowing the similarities your best customers share helps you answer the question, How do I get more users to perform the right actions? Figuring that out increases your product’s value and stickiness, which will increase your profitability in a few ways:

You can charge more for a product that offers greater value.

The better you understand each user persona, the better you can create features targeting those personas’ needs. This allows you to create a pricing structure which charges more for additional features targeted users would want access to.

As users receive additional value from your platform, the lifetime value of each customer increases, so you make more money over time.

Customizing feature combinations on your platform to specific user types allows you to provide greater value to your customers. With increased value, customers are willing to pay more, and are also likely to stick around longer.

What can I learn from active users metrics?

Active users metrics can showcase how many daily, weekly, and monthly users you have. You can visualize this information as a column chart, like the one above, which shows the actual number of users or the percentage of users. Another way to view this info is as a line chart.

Viewing your active user numbers as a total count is useful to see the adoption of your platform and how many actual users you have. A problem can occur if you don’t know your total number of users (active and inactive). You could see your active user numbers and assume numbers are good when they actually represent an alarmingly small percentage of your total users. Viewing your active user numbers as a percentage helps you avoid the previously mentioned problem but can present its own problem. If the number of people using your platform doesn’t increase but you maintain a good active user percentage, you could miss the fact that new user growth has stopped.

Another visualization method includes showcasing total amounts in a dual axis column and line chart. The columns represent the active users, like in the metric shown above, and a dual-axis line chart showing an active users percentage over the top so you can compare them to diagnose issues.

Yet another way to visualize is by cohort. A cohort analysis of active users helps you see which groups stay on the platform for more in-depth analysis.

If you want to visualize all of your active user data together, a good way to do so is with numerical key value metrics like the ones above.

Key value metrics offer you a performance snapshot so you can see how you’re doing at a glance. But they don’t show trends over time unless you add comparison values to the key values. That said, even with a comparison value you can only see limited trends. Combining a key value with a comparison value with a chart showing historical performance is a good way to see trends.

When deciding the best way to visualize your data, you need to figure out the ideal interval for your software (daily, weekly, etc.), and then your range should be something around a month, a quarter, or a particular release cycle.

Things to watch out for

Don’t confuse active users with active accounts. Active accounts is a KPI similar to active users. However, if you’re only tracking active accounts, you could miss out on some important details.

Suppose a larger company uses your software and they have several users with access to your app. If only one of the many users is a “heavy user” and regularly logs in to your app, that account will be shown as active, causing you to might think the account is not a churn risk. But if the heavy user leaves the company at any point in the future, that account now has no one who is very familiar with or regularly uses the product, and it becomes a churn risk.

To avoid this, cross-check active accounts with active users per day to make sure the company is using it as a whole and there aren’t only one or two “heavy users.”

How do I create active users metrics?

The metrics above were created with Grow. Most of the time, active customers are tracked in a database that your company manages, like MySQL, Postgres, Amazon S3, or others. Grow pulls data from those platforms, then transforms it to create metrics like the ones above.